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November 15, 2010

Top 'Go-To' Fund Leaders Among Advisors

American Funds is the only leader in the large-cap space, while Fidelity and Franklin Templeton 'go-tos' for mid-cap and small-cap

Among advisors seeking domestic large-cap funds, American Funds is the sole “go-to” leader, while Fidelity Investments and Franklin Templeton are close competitors to American Funds when it comes to advisors’ use of mid-cap and small-cap asset classes, a new report by Cogent Research has found.

The Cogent study, Advisor Trends in Asset Class Mix 2010, which surveyed more than 1,400 advisors, found that advisors seeking mid-cap, small-cap or international product offerings prefer no single fund company. However, virtually all advisors who use mutual funds include large-cap growth (97%) or value (97%) funds in their lineup. In these two areas, the survey says, American Funds is considered the “go-to” provider by 39% and 31% of advisors, respectively. BlackRock is American Funds’ closest “go-to” fund competitor in these two asset classes, with 7% and 6% of advisors polled saying they prefer BlackRock. But RIAs, the study revealed, prefer to use Vanguard, Fidelity Investments, and, to a lesser degree, Dimensional Fund Advisors (DFA), over American Funds when it comes to large-cap growth or value funds.

When it comes to mid-cap and small-cap asset classes, the study says, “a much broader set of competitors begins to emerge.” For example, across all six style boxes comprised of small- and mid-cap categories, Fidelity Investments and Franklin Templeton “are just a few points behind” American Funds for advisors who name them as “go-to” providers in these categories. In addition, the study continues, Franklin Templeton shows particular strength among Regional and Bank channel advisors.

Tony Ferreira, Managing Director of Cogent’s Wealth Management practice, said in a statement announcing the survey’s results that “there’s obviously a lot more competition for both mindshare and shelf space in asset classes outside of the Large-Cap arena.” At least a half dozen fund companies, he says, “are in the hunt within the Mid- and Small-Cap fund space.”

The competition heats up even further within specific asset classes and channels, Ferreira continues. Take The Hartford and Lord Abbett, for example, he says. “Among Regionals, these two players match or surpass what a number of larger competitors, including American Funds, are doing in all three Mid-Cap categories.”

For international equity funds, American Funds and Franklin Templeton were named most often, specifically by 25% and 17% of advisors respectively as their “go-to” provider, the study says. However, “in a clear indication of the specialized, fractured, and ‘boutique’ nature of the category, beyond those two providers there are at least 30 contenders each with their own small piece of the pie,” the study points out.

Ferreira notes that international equities have grown to where they now represent about a fifth of advisors’ total mutual fund book of business. “It isn’t everyday that we find ‘Other’ to be the third biggest manager in an asset class.”